Interstate may buy existing wind farm as well as build 500 MW of new wind

Interstate Power and Light (IPL) applied July 27 at the Iowa Utilities Board for approval of ratemaking principles that will apply to IPL’s proposed expansion of its wind generation resources in Iowa, which IPL refers to in this application as the New Wind Project.

Said the application: "With the certainty provided by the Board’s approval of this Application, IPL will increase its owned and operated wind generation resources by up to 500 megawatts (MW) (nameplate). IPL is currently prepared to site approximately 400 MW of new wind generation at locations near its existing Whispering Willow East Wind Farm (Whispering Willow East) in Franklin County, Iowa.

"The time is right for IPL to expand its wind resources. IPL’s customers need cost-competitive energy to meet their current and future energy needs, and many of those customers want more of that energy to come from cleaner sources like wind and solar. The Board’s approval of ratemaking principles for the New Wind Project will allow IPL to respond to its customers’ present and future energy needs with more clean power, and at a lower cost than other resource alternatives."

IPL said that undertaking this investment of up to $1 billion in clean, emissions-free energy in Iowa now will save costs for IPL’s customers over the life of the project, all while enhancing IPL’s balanced generation portfolio and further solidifying Iowa’s position as a national leader in renewable energy. The benefits to customers of the New Wind Project are driven by two key factors.

  • First, as a renewable resource, wind power has no fuel costs. Reducing IPL’s fuel costs will help control its customers’ bills and provide a hedge against the fuel price volatility that affects the delivered cost of power from other generating sources. In its ratemaking principles, IPL proposes that the energy cost savings that result from the use of wind will be passed directly to IPL’s customers through the proposed Renewable Energy Rider
  • Second, the low cost of the New Wind Project is driven by timely capture of the full value of the federal production tax credits (PTCs), authorized and extended under the Protecting Americans from Tax Hikes (PATH) Act of 2015. To qualify for PTCs at the 100% level, IPL must meet certain “safe harbor” requirements under Internal Revenue Service (IRS) guidelines, which require that IPL incur at least 5% of total New Wind Project costs before the end of 2016. In IPL’s case, that means incurring expenditures potentially in excess of $50 million toward the New Wind Project in the coming months. The board’s expedited review of IPL’s application will provide much needed certainty to IPL by enabling it to secure the full value of the PTCs for the benefit of its customers, the utility argued

IPL took its first steps to own and operate zero-emitting renewable energy sources nearly a decade ago, constructing IPL’s 200-MW Whispering Willow East Wind Farm in 2008. In the interim, IPL has secured power purchase agreements (PPAs) to supply additional wind energy to its customers, has recently finalized a new agreement for additional wind generation, and will continue these market purchases where customers will benefit.

IPL may also buy the existing Franklin County Wind Farm

IPL said it is continuing to explore additional options for wind expansion, including the potential acquisition of the Franklin County Wind Farm, for which IPL may seek approval from the board in the coming weeks. The Franklin County Wind Farm is currently owned and operated by IPL’s affiliate, Alliant Energy Resources, and was constructed in 2012.

In addition to wind, IPL’s recently announced solar generation facilities in the City of Dubuque highlight IPL’s initial foray into utility-scale solar generation, further diversifying IPL’s renewable portfolio and providing IPL additional experience with solar power generation in the Midwest, said the utility.

IPL is currently pursuing the purchase and construction of wind turbines capable of generating up to 500 MW (nameplate), with approximately 400 MW to be located near Whispering Willow East. As with Whispering Willow East, the New Wind Project will be constructed, owned and operated by IPL within Iowa, building upon IPL’s prior experience with operating wind generation.

The size and scope of the New Wind Project is limited primarily by the feasibility of completing development and construction in time to maintain its eligibility for the PTCs at their full value. IPL has thus far identified two potential sites, both located near Whispering Willow East, that are each capable of hosting up to 200 MW of additional nameplate capacity and that would be placed in service in 2019 and 2020.

As of this filing, IPL has determined that one of those sites, which IPL refers to as Whispering Willow North, is ready for development and poses few if any additional transmission upgrade costs. Another nearby site, Whispering Willow South, presents similar attributes, although IPL is still evaluating the potential need for transmission upgrades and the need to acquire additional property rights at that location for additional turbines and optimal siting.

In its continuing site acquisition efforts, IPL is using the site characteristics of Whispering Willow North to guide its search for and selection of comparable sites in Franklin County and throughout Iowa that would be capable of hosting additional New Wind Project facilities within IPL’s proposed cost cap ratemaking principle.

With each such potential site, the Midcontinent ISO will ensure that any new interconnections to the transmission system are consistent with standard utility practices and that each proposed interconnection does not degrade the adequacy, reliability, or operating flexibility of the existing transmission system in the area.

Interstate is already looking for wind turbine suppliers

In preparing for the New Wind Project, IPL has engaged turbine suppliers to determine market availability for turbines. The board’s approval will allow IPL to move quickly to purchase and take delivery of turbines shortly before the close of 2016, which is critical to qualifying the New Wind Project for the PTCs at 100% of their value. IPL has requested information from various turbine vendors and has issued a request for proposals to turbine manufacturers for procurement of turbines sufficient to generate 500 MW of nameplate capacity, with responses from those vendors due on July 28, 2016. IPL will evaluate the responses and take the necessary steps to ensure that it has the contractual options in place that will allow it to meet safe harbor requirements before the end of 2016.

Further, and consistent with IRS guidance issued on May 5, IPL will maintain its eligibility for the PTCs by continuously constructing the wind generation facilities and placing them in service by Dec. 31, 2020.

IPL proposes a cost cap for the New Wind Project of $1,961/kW. IPL derived this proposed cap in part from informed estimates of turbine supply costs, construction and engineering costs, substation costs, and related contingency at Whispering Willow North, with additional costs to account for other sites that may need further development. The cost cap does not include transmission costs, which IPL estimates to be approximately $50 million. 

IPL is currently evaluating different contracting methodologies that it may use for the New Wind Project, with a focus on minimizing customer costs and project risks. For example, IPL may serve as its own general contractor on the project. In addition, as project development continues, IPL intends to solicit proposals for Engineering, Procurement, and Construction (EPC) contracts for the New Wind Project facilities, which may help minimize construction and engineering risks. IPL will compare those proposals through a competitive bidding process, and weigh the proposals against the costs that would result if IPL were to serve as its own general contractor.

Alliant officials offer project details

Supporting July 27 testimony came from Ben Lipari, employed by Alliant Energy Corporate Services Inc. (AECS), a service company subsidiary of IPL parent Alliant Energy (NYSE: LNT), as Director, Resource Planning and Project Development. He said the New Wind Project is expected to have a capital cost of up to $1 billion (500 MW), based upon a dollar per kilowatt (kW) cost cap of $1,961/kW.

Lipari said IPL holds easements at Whispering Willow North for property on which approximately 200 MW of generation could be sited. IPL will soon be engaging local landowners in an effort to procure additional land rights and to further expand the site and optimize the site layout. Constructing and operating this part of the New Wind Project would be consistent with existing land uses, given the proximity to Whispering Willow East, IPL’s currently-operating wind generation facility. In addition, permitting associated with Whispering Willow North, including Federal Aviation Administration, species protection requirements, and guidelines on noise present relatively low risks based on IPL’s preliminary site investigation.

IPL has acquired other land rights in Franklin County, which IPL is evaluating as either additional capacity for the Whispering Willow North site, or as a separate site currently referred to as Whispering Willow South. At this point, the Whispering Willow South site would support approximately 200 MW of additional capacity. However, IPL is currently investigating the additional land rights that would be needed to optimize performance and constructability at that location. To that end, IPL will be engaging local landowners to acquire additional land rights in order to evaluate further development of this geographic area for wind generation.

Lipari added that the size and scope of the New Wind Project is currently limited by the availability of development-ready wind generation sites that pose few additional siting and transmission costs, similar to the Whispering Willow North site. IPL continues to evaluate additional wind development sites that have characteristics similar to Whispering Willow North, i.e., high-performing wind resources, located in communities that are supportive of wind generation, and that could be constructed consistent with the proposed size cap and cost cap ratemaking principles.

Also supplying testimony was Brent R. Kitchen, employed by AECS as Manager Resource Planning.

Kitchen wrote that although IPL does not need additional capacity until 2025, IPL has both a short- and long-term need for additional cost-effective energy. By way of example, in 2015 alone, IPL purchased approximately 3,500,000 MWh of energy from the MISO market. These energy purchases comprised approximately 21.8% of IPL’s energy requirements. IPL needs new resources that can cost-effectively meet its customers’ energy requirements, without exposure to price fluctuations in the wholesale market, Kitchen added.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.